The world is stepping into a digital age where new technology is being ushered in at rapid rates. The internet is being used more often and people are engaging in more online activity whether it’s e-commerce, content creation, social networking, or other miscellaneous ventures.
A majority of businesses went remote and “digital” since the Covid-19 pandemic, and nearly 5.4 million applications were filed to create new businesses in 2021. During this period, cryptocurrency had a massive surge with Bitcoin gaining 300% and other’s like Ethereum doing very well. This introduced the concept of creating digital collectibles that could be used for a variety of things including gaining ownership. But more on that later.
What Are NFTs?
NFTs are digital assets that represent real-world objects. Your car, house, art, collectibles, music, identity, and more can be an NFT. However, these digital assets cannot be exchanged for another, making a holder the sole owner of the asset they have custody of.
Picture it this way…anything in the real world can be converted into a digital asset that confirms ownership or authenticity.
NFT History
In 2021, NFTs emerged on the scene causing a paradigm shift. It quickly became popular within the crypto community and saw billions of dollars in revenue from collection sales.
These assets were created and sold using cryptocurrency on different blockchains.
From 2021-2022, the familiarity with these digital items more than doubled from an estimation of 4.6 million to 9.3 million people. Studies show that more people are starting to collect digital items rather than physical ones.
Proof of Ownership
With the way the world is shifting, digital ownership may become just as important as physical proof. It also solves the problem of theft or forgery of high-value items. Having digital authentication can verify assets and prevent them from being falsified.
What’s Stopping Digital Assets From Mass Adoption?
People still don’t understand what they are, why they should own them, and the benefits they offer
The masses don’t care to notice the value and convenience digital assets can bring
The process of obtaining them are “too complicated”
Digital ownership isn’t as attractive as it should be
Digital items have always been around, we just never “owned” them
Why Is Mass Adoption Important?
Normalizes ownership through digital assets
Explores creativity and innovation in new ways that benefit all parties
Incentivizes users for owning digital collectibles and helps owners provide utility for the ones they create
Creates valuable communities through exclusive memberships
Allows new ways to implement utility
Merges the traditional economy with the digital world
Community
Communities are super important for growth and longevity. Without an engaging community, most businesses would fail. Whether it’s a client or consumer, both parties have to have a growing relationship. From products to services, this keeps the wheel of input and output going. Many different benefits come with centering a community around digital assets.
-Bringing people together
There has to be a reason that someone wants to own a digital asset in the first place. Audiences can be captured by providing some sort of value in exchange for them joining the community. Popular brands like Nike, Gucci, and Adidas have huge audiences so merging their business models with the digital world will help normalize the use of these digital collectibles. This will encourage more adoption and comfort around obtaining these digital assets.
Many traditional companies have entered the NFT space in the last year. Nike was able to be an early mover by releasing its collection of virtual sneakers called Cryptokicks. They have seen over $185 million in revenue since the release. Other well-known brands are doing very well also as they continue to conform to digital economic models.
Providing digital collectibles will also increase the streams of revenue for iconic brands. As adoption continues to increase, all parties involved will be able to benefit from the opportunities presented.
-Making communities valuable
Other businesses like restaurants, clubs and bars can also integrate digital assets in their models. They can do this by making these tokens act as VIP memberships that give exclusive access to private events, unique perks, or even owning a piece of the business itself. This gives people a sense of ownership and importance knowing that they have value within those sectors. It’s also a cool way of introducing new concepts by offering digital collectibles of meal recipes, signature menu items, and other experiences.
-Incentivizing people to join
Everyone likes discounts, rewards, and free things. Incentivizing people to own these digital assets will attract individuals to become members of loyalty programs which will give an exchange of value.
Starbucks is currently in the works of rolling out an NFT loyalty program that rewards customers with exclusive experiences and perks.
A majority of online and in-store retail brands offer some type of rewards program so what better way than to embrace digital ownership by them being a member? Digital collectibles will make shopping experiences more worth it and fun all together.
This would also be a great way for small businesses to grow and stand out by providing digital collectibles for their consumers. Doing this will increase familiarity and adoption all around while also helping businesses scale.
How Are Business Models Adapting?
The common business models we are familiar with will change indefinitely. Nothing ever stays the same. Blockbuster was replaced by Netflix, while taxis were replaced by Uber and Lyft, and so on. Models change and technology grows over time so this will renew the limited definition we have of ownership. Not only will people want to own real-world assets, but they will be encouraged to own digital ones as well.
Gaming
Gaming has a pretty easy way of rolling out digital assets. Most games as we know already have an in-game currency, wouldn’t it be cool to turn that into a digital asset?
This falls in line with the P2E (Play-To-Earn) utility for games. Users play the game and receive digital rewards as compensation. Players can either hold these digital items or sell them for a form of currency.
Let’s use NBA 2K as an example. When players do MyCareers, they earn a currency called VC (Virtual Currency). This currency is used to level up players, purchase in-game items, and more.
These in-game items could easily become digital assets stored on the blockchain that hold real value for players while the currency acts as the legal tender. Of course, they would have to change the earning mechanisms and create a token on the blockchain, but this would still be attainable and incentivize users to keep playing the game.
Fashion
Fashion is and has always been a huge sector in the real world. From popular brands to urban streetwear, communities have been built around the movement and trends continue to evolve. Brands will soon incorporate authenticity certificates through digital collectibles. Purchasing a high-value item and receiving a digital authentication token validating your purchase will be cool to have. Some fashion pieces already come with a serial card or authentication receipt that could get lost or destroyed over time so having a digital copy will help protect their longevity.
On September 10th, 2021, Karl Lagerfeld released 777 digital pieces, priced at 77 euros each, and sold out in 33.77 seconds. They understood how important this digital shift would be and decided to take advantage. Other fashion brands are also entering the Metaverse by incorporating clothing in the virtual world. Users will not only be able to buy and sell collectibles but also wear them in Metaverse events. This not only keeps the real-world market alive but establishes an additional outlet for more revenue and new customers.
IMAGE COURTESY OF: DOLCE & GABBANA, WITH UNXD
Even smaller brands will be able to establish themselves by creating digital clothing and uploading it into the digital world as collectibles or Metaverse apparel. Having unique 1-of-1 collections will also be a great way to add exclusivity to items within the fashion segment.
Cars
A lot of people are car enthusiasts, collectors, and members of car clubs. What more of a perfect way to include digital collectibles to go along with new purchases? Car memberships can be rolled out for members of a car club which will come with exclusive perks.
For example, Lamborghini partnered with a few artists to create a 1-of-1 digital collectible that portrays a real-life car. The buyer will be awarded different forms of VIP treatment from Lamborghini. This will include exclusive previews of future limited-edition Lamborghini models, an exclusive invite to activities with the local dealership, a private tour of the Lamborghini Museum, and a meet/greet with the NFT artists. This shows how much value and utility can come from a digital asset. I use the word asset because this opportunity adds real-world value that comes with having the digital item.
Real Estate
One of the most interesting sectors when it comes to real-world assets is Real Estate. The process of purchasing real estate can be complicated and lengthy at times. There are limits and restrictions on certain investments which can deny individuals the opportunity to acquire this type of asset class. Investors exchange a lot of time trying to find the right deals and opportunities. The tokenization of real estate can help solve these problems. Not only does it give investors a fair chance to purchase real estate, but it also simplifies the process of doing so.
Imagine having the option to purchase fractional tokens of a house or its equity while having the validation stored within the token itself. Doing this allows investors to receive a portion of the rent or price appreciation that the property accrues over time. This will change the game of real estate as we know it. Platforms like Vesta Equity and Lofty AI are already making this possible through the blockchain.
Vesta Equity enables property owners to access the value of their property without loans and gives property investors the chance to build a portfolio of tokenized fractional residential real estate. They also include a resource hub full of information regarding tips, examples, and insights into processes and how they work. Platforms like this are key when laying the foundation for getting into real estate through the digital world.
LoftyAI offers this same opportunity starting as low as a $50 investment. They make it super easy and simple to invest, a baby boomer could do it! LoftyAI is very detailed and thorough when it comes to its platform. They provide so much valuable information you would think you were in the process of buying RE through the real-world process. They give details about the property, recent updates, all financial information, real documents, the current market, and a projected returns calculator that lets investors assess the investment before they partake in it. These are brilliant ways of helping people adopt digital ownership while providing easy routes to do so.
Social Media
Social media will probably be one of the biggest influencers of digital adoption since it is used so heavily. Social media can help integrate this by allowing platforms to utilize NFTs as profile pictures, or by having collection sections where people can display their digital items and show them off. Instagram is already working together with Facebook to allow creators and collectors to share NFTs that they have created or bought. This is the first step of many to help onboard the masses and we should see it play out accordingly.
Music
Some artists don’t control 100% of their royalties and aren’t the full owners of their music. Uploading their music to platforms like Audius and Royal fixes this. Artists can tokenize their singles, mixtapes, and albums and sell them directly to their fans. This cuts out the middleman labels and platforms that take a percentage of earnings by being the intermediary. This helps give artists full ownership of what they produce.
Art
We saved art for last because a majority of the population already correlates these digital assets to art but there’s so much more to it than just art. However, art is one of the most popular sectors right now because this is where creators have been able to flourish the most in the past year. From custom-made marketplaces to auctions, to VR galleries, digital art has made it cool to partake in the digital aspect of things.
Allowing creators to own their content and make it tradeable in their marketplaces is a win-win on the board. Artists can merge their portfolios with the digital spectrum to take their art to the next level. It has already been popular but becoming more popular as digital art is widely adopted.
Artists can even upload their artwork to different Metaverse galleries like Spatial and OnCyber where people in the Metaverse can gather and visit them just like they would at an actual museum.
Alternate Real World Use Cases
These digital items can be used as access tokens to physical and virtual events. Programmable tickets can be updated or come attached to a game or some other item. These tickets can provide royalties upon secondary sales or auctions, and even turn digital tickets into unique commemorative assets. They are already currently being used as subscriptions to different paywalled media websites, and this concept will likely carry over into virtual worlds where users will need to use access tokens to enter certain spaces. In addition to being collectibles, NFTs can be combined with event tickets to provide access to an event.
There are so many other possibilities that can be achieved when it comes to merging real-world models into digital ones. We will continue to see more areas embrace this shift as it becomes more popular and beneficial.
Conclusion
NFTs aren’t dead. This is only the beginning. It may take longer than we think, but it will happen. We have to let innovation and adoption take their course. Soon enough it will be a widely known trend. There are other factors we need to account for like the security, privacy, storage, tech, and other factors behind these digital assets but we will save that for a later deep dive. As far as utility is concerned, there are many things that can be done with these digital assets, we just have to get the masses on board as the narrative continues to develop.